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Saturday, March 9, 2013

I was talking to a friend the other day, and we were having a conversation about someone that we know who is expecting a very large income tax return check- over $10,000. The bulk of the person’s federal income tax refund came from Earned Income Tax Credit, which gives the filer an additional tax credit per dependant claimed. This person that I refer to perfectly fits the stereotype of a low-income, financially illiterate, wage earner. Why? She basically has grandiose plans for the huge income-tax return that she will receive. Like, running out and purchasing name brand clothing and shoes for her family, several HDTVs, new furniture, giving money to other people, having house parties, and the list goes on.Well, there is nothing wrong with taking some of the money and actually doing something to enjoy yourself. At the same time, some people just go buck wild with this. They justify their excess spending by telling themselves things, such as “You only live once (YOLO)” or “Why have all this money if you aren’t going to spend it?” Some of them can’t sleep, fervently anticipating the day when that money arrives. They don’t think about planning for the future or putting something away for a life crisis. Then, when the shit really hits the fan, and they need cash immediately, they realize that they have screwed themselves with a metal spiked dildo and no Vaseline.

I don’t mean to sound harsh, because I know what it is to be poor and disadvantaged. I think that the reason why the U.S. government established the Earned Income Tax Credit is for the main purpose of stimulating the economy. The politicians and government economists know that most people of the lower socioeconomic class are lacking in financial literacy. When most (not all) poor people get a windfall, they usually do something foolish with the money, rather than looking out for themselves. I mean if we are to be honest here, most people are poor for a reason. The politicians know that the first order of business for these folks is to go to a casino and gamble away their income tax check or to go on major shopping spree, thus boosting the economy.